Indonesia’s automotive industry hailed the issuance of the regulation on electric vehicles (EV) early this month, which they said had provided a clearer picture about the EV production.

Association of Indonesian Automotive Manufacturers (Gaikindo) cochairman Jongkie D. Sugiarto said that Gaikindo supported the new regulation as it had already provided a clear road map for the future development of the EV industry.

Jongkie, however, said that the industry players still waited for more specific regulations from relevant government institutions to determine what steps they would later take.

“Afterward, brand holder agents will be able to decide what types of vehicles they will produce, which [components] will be imported or domestically produced,” he told The Jakarta Post by phone on Aug. 16.

Separately, Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman of industry Johnny Darmawan said the association also supported the new regulation but it should be well-implemented to protect the domestic automotive industry.

“We support it,” he said. “The next steps should be deliberately taken in realizing the vision,” he told the Post on Monday

Presidential Regulation No. 55/2019, which covers a number of issues including the production of batteries, the use of local components, charging stations and tax incentives for the production of the electric vehicles, was issued by President Joko “Jokowi” Widodo on Aug. 8.

According to the regulation, two-wheeled or three-wheeled EVs must have a minimum local content of 40 percent if they are to be manufactured between 2019 and 2023, a minimum of 60 percent if they are manufactured between 2024 and 2025 and a minimum of 80 percent if they are manufactured in 2026 or later.

Meanwhile, EVs with four wheels or more must have a minimum local content of 35 percent if they are manufactured between 2019 and 2021, a minimum of 40 percent if they are manufactured between 2022 and 2023, a minimum of 60 percent if they are manufactured between 2024 and 2029, and a minimum of 80 percent if they are manufactured in 2030 or later.

Furthermore, Article 11 of the regulation stipulates the possibility for the industry to import components in the forms of incompletely knocked-down or completely knocked-down products.

Article 12 of the regulation stipulates the possibility of importing completely built-up vehicles, especially for stakeholders aiming to build local manufacturing facilities.

The imports, however, are limited to a certain number of vehicles for a certain period of time, starting from the facility development, which should be done in accordance with the rates of the local contents and the capability of EV production.

The regulation also stipulates that the government should provide fiscal and nonfiscal incentives for the stakeholders related to EV development.

The fiscal incentives include tax deductions, research and development financing and infrastructure development funding, while the nonfiscal incentives include security assurance for the industry’s operations.

In response to the incentives, Johnny said the government should make sure they would motivate producers to accelerate industrial development. “There should be rewards and punishments,” he said.

Industry Minister Airlangga Hartarto said recently that Indonesia aimed to export 1 million vehicles by 2025, of which 20 percent would be EVs.

To boost the exports, the automotive industry would need a total investment of US$4 billion until 2025, he said.

Beside issuing the regulation, the government is to revise Government Regulation No.41/2013 on sales tax on luxury goods.

The planned revision would change the classification of taxes imposed on certain passenger vehicles based on their emission rates, namely low-cost green cars (LCGC), hybrid EVs, plug-in EVs, flexy engine EVs, fuel cell EVs and fully electrified vehicles. The planned revision would also lower the rates of luxury goods taxes to a minimum of 15 percent from the current average of 40 percent.

“The incentives for the value added tax on luxury goods will be issued later this year,” Airlangga said. (asp/mrc)

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